Budget 2017: How Does it Impact First Home Buyers?
The 2017 federal budget includes a number of measures that will provide much-needed help for first home buyers. Tax cuts on deposit savings, tighter rules on negative gearing and punitive measures for overseas investors are all set to free up the market for those struggling to get a foot on the property ladder.
Pressure has been mounting on state and federal governments to provide solutions to the affordability issue as prices continue to surge in east coast cities. Scott Morrison’s second budget responds with a number of good ideas which we’ll explore below.
Breaks for First Home Buyers
First home buyers will receive preferential tax treatment in order to make saving for a deposit easier. From July 2017, you’ll be able to divert your pre-tax income towards a special first home saver account which will resemble a superannuation account.
Individuals can make voluntary contributions of $15,000 a year and $30,000 in total to this account. These contributions and deemed earnings will be taxed at a concessional interest rate of 15 per cent. This scheme will enable first home buyers to boost their deposit savings by at least 30 per cent compared with a standard deposit account.
Incentives for Downsizers and Release of Surplus Land
The Federal Government is encouraging older people to downsize by giving tax breaks if they funnel proceeds from selling their home into their pension funds. From July 2018, individual downsizers aged 65 and over who have lived in their home for at least a decade will be able to make a non-concessional contribution of up to $300,000 into their super from the proceeds of their sale. Couples can contribute $600,000.
Surplus defence land on the outskirts of Melbourne is also set to be released for residential use. These measures are especially important in markets like Melbourne and Sydney where lack of supply has been a significant factor in pushing up prices. With more housing stock, first home buyers have a better chance to secure appropriate accommodation.
Negative Gearing Rules
Negative gearing has not been removed, however a number of rules have been tightened around what can be claimed. Investors can no longer claim tax deductions for travel expenses “related to inspecting, maintaining or collecting rent for a residential rental property” from July 2017.
Additionally, depreciation deductions for plant and equipment items, for example washing machines and ceiling fans, can only be allowed if the investor actually bought them. These measures address concerns about tax write-offs being claimed by successive investors and is set to bring in over $260 million over the next four years.
Ghost House Tax
To dissuade foreign investors from leaving their properties vacant, the Federal Government will impose an annual charge on residential properties that are unoccupied or available to rent for at least six months in each year. This will once again free up more housing stock by encouraging these investors to lease their properties or sell them off to someone else.
Keep in mind that all the measures introduced to assist first home buyers in the 2017 federal budget will be in addition to state government measures as well. The Victorian Government plans to abolish stamp duty on properties worth $600,000 or less while in Queensland, the First Home Owners Grant has been boosted to $20,000.
The NSW government is yet to announce anything, but a taskforce has been set up and Premier Gladys Berejiklian has declared housing affordability to be “the biggest issue” for her government. With pre-existing measures such as SMSF loans, future prospects are drastically improving for first home buyers.
If you need assistance or advice about purchasing your first home in Queensland, please get in touch with the team at Multi Choice Home Loans.